Banks face growing competition as younger homebuyers become increasingly open to doing all banking online
A digital battle is set to erupt in the $1.9 trillion home loan market – and it’s a fight banking giants can’t ignore.
Mortgage is the most lucrative business in Australian banking, with it dominating the big four banks’ loan portfolios and accounting for an estimated $20 billion a year in industry-wide profits.
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But with more of Generation Y entering prime home-buying age, banks face growing competition from technology-based players eyeing these younger homebuyers, The Sydney Morning Herald reported.
Giving these fintechs an opening is the fact that younger, tech-savvy clients are increasingly open to do all their banking online. New players that started in areas such as payments are now attempting to pick off these homebuyers, albeit with backing from established banks.
These players include Afterpay and neobank Up. Both are planning to start selling mortgages this year through their app, targeted at Gen Z and Gen Y customers. Afterpay will be funded by Westpac, while Up is owned by Bendigo and Adelaide Bank.
Also eyeing a piece of the action are non-bank lenders such as Nano Digital Home Loans and Athena Home Loans, alongside older businesses such as Loans.com.au, owned by Firstmac, the report said.
Andrew Walker, Nano’s co-founder and chief executive, said digital home loans are “rapidly becoming the norm” and that this shift to digital has been accelerated by COVID-19.
“If you look at the global data, you’ll see that Australia is far behind the rest of the world, where currently less than 3% to 5% of mortgages are originated digitally, compared to 30% in the US,” Walker told SMH. “We originally anticipated it to be three- to five-year market shift, but we now believe that it will take place over the next 12–18 months.”
Some survey data suggest, however, that even young digital-savvy customers still want to engage with mortgage brokers when taking out a loan, given its complexity and high stakes. But in any case, there is little doubt that digital home lending will emerge as a key battleground in banking, SMH reported.